In Malaysia, paying taxes is a legal obligation for every citizen and resident. Come April every year, everyone is scrambling to file their tax returns (including me!). It’s another year. Let us do better next year. Here are some ways to help you get started for 2023’s tax savings plans by taking advantage of tax deductions, exemptions, and credit for saving tax money in Malaysia.
Tip #1: Claim Tax Deductions for Expenses
One of the most effective ways to save tax money is by claiming tax deductions for expenses. Tax deductions reduce the amount of taxable income, which in turn reduces the tax liability. In Malaysia, taxpayers can claim deductions for various expenses such as medical expenses, education expenses, and donations to charitable organizations. For instance, taxpayers can claim a tax deduction of up to RM 6,000 for medical expenses for themselves, their spouse, and their children. Taxpayers can also claim a tax deduction of up to RM 7,000 for education expenses for themselves, their spouse, and their children. Donations to charitable organizations can also be claimed as a tax deduction, up to a maximum of 7% of the taxpayer’s aggregate income.
Tip #2: Contribute to Retirement Funds
Another way to save tax money in Malaysia is by contributing to retirement funds. The government of Malaysia encourages citizens and residents to save for retirement by offering tax incentives for contributions to retirement funds such as the Employees Provident Fund (EPF) and the Private Retirement Scheme (PRS). Taxpayers can claim a tax deduction of up to RM 6,000 for contributions to the EPF and up to RM 3,000 for contributions to the PRS.
Tip #3: Take Advantage of Tax Exemptions
In addition to tax deductions, taxpayers in Malaysia can also take advantage of tax exemptions to save money on taxes. Tax exemptions are granted for certain types of income or activities, and they reduce the amount of taxable income. For instance, taxpayers can claim a tax exemption of up to RM 10,000 for interest earned on savings accounts and fixed deposits. Taxpayers can also claim a tax exemption of up to RM 8,000 for rental income received from the letting of residential property.
Tip #4: Utilize Tax Credits
Tax credits are another way to save money on taxes in Malaysia. Tax credits directly reduce the tax liability, and they are available for certain activities such as investing in technology, purchasing energy-efficient equipment, and contributing to the National Education Savings Scheme (SSPN) for their children. Taxpayers can claim a tax credit of up to RM 3,000 for investing in technology, up to RM 20,000 for purchasing energy-efficient equipment, and up to RM 6,000 for contributions to the SSPN.
Tip #5: Plan Ahead and Seek Professional Advice
Finally, taxpayers in Malaysia can save tax money by planning ahead and seeking professional advice. Tax planning involves assessing one’s tax liability and identifying strategies to minimize it. Seeking professional advice from tax experts can help taxpayers understand the tax laws and regulations and identify the best tax-saving strategies for their individual circumstances.
Hopefully you find this piece helpful in helping you save more tax money going forward. To recap, in take advantage of tax deductions, exemptions, and credits, contributing to retirement funds, and seeking professional advice. By planning ahead and understanding the tax laws and regulations, you can reduce their tax liability and save money on taxes.
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